Question

Consider the following information on Stocks I and II:

		RATE OF RETURN IF STATE OCCURS
STATE OF   ECONOMY	PROBABILITY OF STATE OF ECONOMY	STOCK I	STOCK II
Recession	0.06	-0.35	-0.25
Normal	0.23	0.29	0.23
Irrational exuberance	0.71	0.39	0.29

The market risk premium is 12 percent, and the risk-free rate is 5.4 percent.

For standard deviations: (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

For betas: (Round your answers to 2 decimal places. (e.g., 32.16))

The standard deviation on Stock I's expected return is ___ percent, and the Stock I beta is ___. The standard deviation on Stock II's expected return is ___ percent, and the Stock II beta is ___. Therefore, based on the stocks' systematic risk/beta, Stock ___ is "riskier".

Answer 1